Schiff: Advertising, not BOGOs, driving joint care category sales

By Michael Johnsen

SALT LAKE CITY — Schiff has realized some sales success reducing its reliance on promotion across the joint health category — a category that has been defined by the prevalence of buy-one, get-one deals over the past few years — the company told analysts Thursday in a discussion on fiscal 2012 third-quarter results.

"[Overall] net [third-quarter] sales grew 25% over the same period last year, driven by a 53% increase in branded sales," Schiff director, president and CEO Tarang Amin said. "Importantly, all key brands grew with contributions from our probiotic business acquired in June, new product introductions and benefits from a significant increase in advertising." During the fiscal third quarter, selling and marketing expense as a percent of net sales was 24% versus 14% last year, or about an additional $8 million, according to Amin.

Amin credited that increase in consumer advertising with growing its joint care brands despite fewer promotions at shelf. "A great example is Schiff MegaRed, which continued its rapid growth even at a 60% price premium relative to fish oil. Our MegaRed efforts also included gaining over 75,000 likes on Facebook and product sampling on the Dr. Oz show," Amin said.

That success across Schiff's joint business is measured against one year ago, when the joint business was trending negative. Amin attributed last year's decline to two factors — continual price discounting across the category and a lack of new product introductions. "We continue to see price discounting from some of [the] competitors," Amin said. "And it's a bit perplexing because as we followed our strategy between advertising and product innovation, we've seen much stronger growth rates than the rest of the categories. So I do believe, over time, people are going to take a look at who's actually growing share and who's not, and that should change tactics."

Schiff currently is focused on its MegaRed joint product, a proprietary formula of krill oil and astaxanthin to promote joint health. Over the fourth quarter, Schiff will be testing a new Move Free item, which maintains and repairs cartilage, and Move Free Lean, which provides joint relief and support to leaner bodies.

In addition, Schiff is gearing up for several line extensions across its probiotic portfolio that will feature BC30 probiotics technology as a key point of differentiation.